The airline has also forecast that it expects to post an underlying profit of between $180 million and $230 million for the first half of this financial year.

The guidance includes a one-off payment of about $130 million from US planemaker Boeing.

The better sentiment led to Qantas shares rising almost 6 per cent to $1.30 early on Thursday despite suggestions from some investors that it overshadowed a disappointing earnings forecast for the first half.

Qantas did not give guidance for the second half because of volatile conditions, uncertainty in global economic conditions, fuel prices and foreign exchange rates. It will also spend $100 million less on capital requirements this financial year than previously forecast.

The chairman, Leigh Clifford, said in a statement that the board did not believe its share price reflected the airline group’s fair value, particularly when taking account of its frequent flyer division, the domestic operations, the budget offshoot Jetstar and its planned alliance with Emirates.

The buyback represents about 4 per cent of its shares on issue and is expected to begin in December.

Qantas will repay $650 million in debt in January, which will be five months ahead of schedule. It will be part of a $1 billion debt reduction program for Qantas this financial year.

The airline will fund the measures from the money it receives from the sale of its half stake in road freight business Star Track Express, and the settlement from Boeing.

The two deals will deliver Qantas a total of $750 million this financial year.

Qantas said in August that it would receive $US433 million in ‘‘contractual liquidated damages’’ from Boeing after exercising its right to walk away from firm orders for 35 of the long-delayed 787-9 Dreamliner aircraft. Of the total payment, $US140 million will flow through to Qantas’ bottom line in the first half.